However, a lot can change for Apple between January and the second half of the year. It might not be able to manufacture the phones to its liking. Component pricing might not be where it wants it to be. Lots can go wrong.

That said, it makes sense for Apple to do something to address parts of the world where pre-paid phones are more popular than subsidized phones bought with carrier contracts. This could mean a decline in profit growth, and margins, but if Apple wants to preserve unit growth and go for market share, we're not sure it has any other choice.

Putting aside the "cheap" part of the report, it sounds increasingly like Apple is working on a redesigned iPhone with a bigger screen. If this is true, it's a major departure from Apple's recent style of waiting a year to redesign the phone.

The rise of Samsung and the hyper-competitive smartphone market probably wouldn't let Apple sit still for a year.